Spotify's Bill If It Loses the Songwriter 'Bundling' Fight Is Now About $619 Million, and It Grows by Roughly $60 Million a Quarter

If you write songs, this is your money. Not in a hypothetical way. This is the mechanical royalty pool that pays songwriters and publishers every time a track gets streamed.

Spotify's potential liability if The Mechanical Licensing Collective wins its 'bundling' lawsuit outright has climbed to about €538 million, or roughly $619 million, Music Business Worldwide reported, citing the notes to Spotify's third-quarter 2026 financial statements filed with the Securities and Exchange Commission.

That's up €65 million from the €473 million Spotify disclosed in its Q2 filing. Both numbers are cumulative from March 1, 2024, and both only apply if The MLC is 'entirely successful,' MBW reported.

<h3>What the fight is about</h3>

The MLC sued Spotify on May 16, 2024, alleging Spotify had underpaid songwriters since its March 2024 reporting by classifying Premium as a bundle that includes audiobook access, per MBW. Bundles get a lower mechanical royalty rate. So if Premium counts as a bundle, songwriters get paid less per subscriber.

Judge Analisa Torres dismissed the original complaint in January 2025, holding that Premium is a bundle. The MLC filed an amended complaint on Oct. 1, 2025, targeting how Spotify valued the different parts of the bundle and how it reported royalties on its Audiobooks Access plan.

In a Sept. 1 order, Torres refused to let The MLC take an immediate appeal. 'MLC has not met its burden to show that there is a "substantial ground for difference of opinion" as to the Court's dismissal order,' she wrote, according to MBW. She said the text of the regulation 'leaves no ambiguity' that Premium combines products with 'more than token value' with a music streaming service. The same order struck Spotify's 'unclean hands' defense, which argued The MLC hadn't gone after other services over similar bundles. 'This defense has no basis in law,' Torres wrote.

So the €538 million worst case only happens if The MLC eventually overturns the bundle ruling on appeal after the rest of the case is resolved.

<h3>What Spotify says</h3>

From the filing, as quoted by MBW: 'If the MLC were to ultimately be entirely successful in its claim alleging that Spotify's Premium Service is not a bundle, then the liability in relation to the period March 1, 2024 to September 30, 2026 would be approximately €538 million, plus potential penalties and interest, which we cannot reasonably estimate. Any liability would be partially offset by direct deals with publishers.'

The filing doesn't say what drove the latest increase.

<h3>The number keeps growing</h3>

Track the estimate and you can see the clock running. Spotify's first number, reported by MBW in July 2024, was €46 million for March 1 to June 30, 2024. By the end of June 2025, it hit €256 million. Between June 30, 2025, and June 30, 2026, it rose by €217 million, just over €54 million a quarter on average. The last two quarters were bigger: €63 million, then €65 million.

For context, Spotify reported 306 million Premium subscribers and €672 million in quarterly operating income in its Oct. 22 results, per MBW.

<h3>The side deals</h3>

Since January 2025, Spotify has signed direct U.S. publishing deals with Universal Music Publishing Group, Warner Chappell Music, Kobalt, Sony Music Publishing and BMG, MBW reported. Those are the deals Spotify says would partly offset any liability.

Here's my concern as someone who covers independent artists: those deals are with the biggest publishers. The songwriters without a major publisher behind them are the ones who rely most on The MLC's statutory rate.

<h3>The next rate fight</h3>

The bundling question has also landed in Phonorecords V, the Copyright Royalty Board proceeding that will set mechanical rates for 2028 through 2032. In their filing there, the National Music Publishers' Association and the Nashville Songwriters Association International say Spotify has already taken 'more than $500 million in mechanical royalties that should have been paid to songwriters and publishers,' MBW reported.

The case is heading toward summary judgment. Pre-motion letters are due by Dec. 11 under a schedule approved Oct. 9.

<h3>Dez's take</h3>

My opinion: Spotify is winning in court right now, and the judge's language was not close. But the company itself keeps telling investors the downside is getting bigger by roughly €60 million a quarter. When a company is confident, it doesn't usually have to keep raising that number.

For Boston songwriters, the move is simple. Make sure you're registered with The MLC and your splits are right. Whatever happens with Spotify, unclaimed and misattributed royalties are money you can actually control.